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Contingency Fees: Do You Really Need It?

by | Mar 14, 2024 | Personal Injury

If we work on your case for five years, it doesn’t matter if we put 5,000 hours or 50,000 hours, you’re only going to pay us a percentage of what we collect. If we go through and let’s say we never collect anything or we have a trial and lose, then you pay us zero – Attorney Darryl Isaacs.

Contingency fees are a financial arrangement that helps a client to avoid paying any out-of-pocket expenses to his attorney while pursuing a lawsuit. It is popular in personal injury cases. You might have thought it is a high risk for lawyers. But if they win the case, they will be richly rewarded. They work for you on a contingency basis because the big corporations and medical malpractice lawsuits award hundreds of thousands of dollars for injury settlements.

Lawyer’s contingency fees may vary according to the experience of the attorneys. If you meet with a bus crash or to file any other lawsuit, you may need to get legal representation for receiving compensation and guidance. It is significant to know well about contingency fees before filing a lawsuit. Read on to understand more about contingency fees.

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The contingency fee paid to the attorney depends on various factors. It includes the complexity of the litigation as well as who pays for legal fees and when. This arrangement has many pros and very few negatives. The contingency fees method is suitable for all cases except two cases. They are,

  1. Divorce cases
  2. Criminal cases

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Advantages of Contingency Fees

  • The poor plaintiff can access justice since they can consult the attorneys without paying money. If they lose the case no need to pay any money to the attorneys and, they do not have any loss because of filing the lawsuit.
  • The victims can file a lawsuit against big corporations or companies with the help of contingency fee attorneys.
  • Contingency basis attorneys try to work hard to win the claim to obtain their fee.
  • Lawyers only agree on a contingency fee basis if there is more chance of winning the case. So, when they agree with the contingency fee method, you can believe that you can win the case.
  • Attorneys will pay litigation costs, including expert witnesses, court reporters, private investigators, and other people or services required to win your case. Hence if you lose the lawsuit, you do not need to give any money to attorneys.
  • Hourly lawyers will try to take more time to complete the case because they will get the fee based on how much time they will take to complete the lawsuit. But here, they will try to complete the litigation as soon as possible since they are not going to receive any extra money from you.
  • You will receive straightforward responses from attorneys, whether they can run your case or not.

Drawbacks of Contingency Fees

It affects the lawyers, as it is no win, no fee. So, only well-off attorneys can make agreements with clients.

  • You might have to pay up to 50 percent of your recovery amount if the complexity and risk of the case are more. So, attorneys will receive half of the amount from your settlement. For example, if you receive $1 million, you have to pay $50,000. It would be much higher than an hourly basis.
  • The attorneys may decline your case if they feel the claim is not worth it.

Contingency Fees Process

It is crucial to understand the types of attorney remuneration before engaging in any fee arrangement or legal representation. The first stage of the process is to choose an attorney, but keep in mind that fees and costs are a factor in the decision.

First, analyse whether it is suitable for your situation and your case before entering into it. Consult many attorneys and ask them to explain the outcome of your case and the contingency fees percentage. After that, choose the best suitable attorney for your litigation. Before selecting an attorney for your case, you should have a clear idea about

What is the maximum amount you can pay to the attorney?

Do I need a newly minted attorney or experienced attorney for my case?

Will they make an effort to win the lawsuit?

What is the typical contingency fee range in your area for this type of case?

And also, you must know some truths about contingency fees attorneys. They are,

  • Higher contingent fees do not imply a good indication.
  • Newly minted attorneys may offer to work for a lesser fee.

Comparison between Contingency Fees Lawyer and Non-Contingency Fees Lawyer

Contingency Fees Lawyers

  • The contingency fee lawyers receive the fees after successfully winning the claim. Contingency means no win, no loss. So there is no need to pay anything to the attorneys if you lose the case.
  • The attorneys will get the extra payment other than the contingency fees. For example, computer fees, lawsuit filing cost etc.
  • If they think the case is worthless, they will decline the lawsuit. Because if lawyers try and lose the case, they will not get anything.
  • The contingency attorney’s fees will be one-third of the total compensation they receive.
  • Attorneys fix the contingency fees based on the complexity and risk of the case.

Non-Contingency Fees Lawyers

  • The non-contingency fee lawyers receive the fees hourly basis or fixed standard rates. Here, you must pay the lawyers even the case is failed.
  • These lawyers will also receive extra payments other than the hourly pay.
  • The non- contingency attorneys try to run the case even the case seems worthless. Since they get the amount for their work on an hourly basis.
  • The attorneys will fix the amount based on the case.

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Rules for Lawyers to Determine Contingency Fees

There are no rules to determine contingency fees in the legal industry. You cannot get straightforward answers from statutes or rule books. The rule book has plentiful information, but it will not satisfy your need. So, it is better to ask your colleagues or mentors for better information about contingency fees.

After finding the rule, it is crucial to know about state rules, since it vary by state. Contingency fees won’t be the same in all the states. So you must know thoroughly before entering into the contingency fee agreement.

In addition to a set of fee guidelines, each state has a complex collection of considerations used to establish the appropriateness of client charges. Learn these criteria and compare them to the average proportion of your co-workers. Spending some time to learn these criteria will save you more time in future.

It is required to get the client signed in the informed consent form. The clients may refuse to give the agreed amount after winning the lawsuit. So it is necessary to write all the risks in a detailed manner and get a sign from the client for your safety.

How Is The Contingency Fee Calculated?

Is your mind raising a question, how is the contingency fee calculated? Read on for further information regarding your query.

The law does not regulate the amount, which lawyers can obtain from clients. The attorneys get an amount of 20 percent to 50 percent from the recovery amount after successfully winning the case.

In a typical contingency fee, most personal injury attorneys collect around 33 percent of the restitution amount. The contingency fee example is, if a plaintiff receives $200,000 restitution from the defendant’s insurance company, attorneys will get 66,000 from your settlement.

Furthermore, if they go to trial at court, the attorney will receive more than 33 percent up to 40 percent in non-complicated cases. If the lawsuit is complicated, then the contingency fees maybe around 40 percent or more. If it goes to trial at court, they will get more than 40 percent. it is like a high risk contingency fee.

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Other Payments Apart From the Contingency Fees

As a client, you are responsible for some more payments in a lawsuit. A portion of your gross settlement is deducted as a lawyer’s contingency fee, and the additional costs and expenses are deducted second from the remaining balance.

For instance, if the plaintiff receives $100,000 for recovery amount, from this $33,000 will be the attorneys’ contingency fees. Here the contingency fee is 33 percent of the total recovery amount. The remaining amount will be the victim’s compensation. From the victim’s remaining restitution amount, other costs and expenses are deducted.

Apart from the contingency fee, you must pay some more payments to attorneys. They are,

  • Filing fees
  • Travel expenses
  • Deposition costs
  • Fax charges
  • Travel expenses
  • Messenger charges
  • Medical consultation
  • Computer fees
  • Investigator cost
  • Expert witness fees

The plaintiff must repay these payments to lawyers after successfully recovering the compensation. But if the victim loses the case no need to pay these extra payments, what they spend from their pocket. Before paying these additional charges, plaintiffs should have a perfect knowledge of who is responsible for the costs. The legal services agreement frequently includes this information.

Contingency Fee vs. Hourly Contingency Fee

  • You do not need to pay any money upfront to hire an attorney.
  • After your free consultation with the attorney, they will decide the percentage amount and get a sign in the informed consent form.
  • The percentage amount may vary according to the risk of the case.
  • The attorneys mainly agree to contingency fees for personal injury cases, medical malpractice cases, and product liability.

Hourly Fee

In hourly fees, attorneys get the payment according to the time and the amount of work they have done.

  • It’s crucial to keep in mind that hourly rates differ from one lawyer to the next. It will be determined by the complexity of your case, as well as other criteria.
  • The hourly fee agreement is used for criminal defense cases, family law, business law, and more.
  • For criminal cases, some attorneys charge a fixed fee, plus any costs involved with the claim. Expert witness expenses, deposition costs, computer research fees, transcription fees, mediation expenses, private investigator fees are some examples.
  • If the lawyers’ fee is $200 per hour and they work for 20 hours, $4000 will be the total amount they have paid.
  • When you choose an hourly fee, you should know the experience of your lawyer similar to your case. If the lawyer has no experience, the claim will take longer to finish. They will get more from you after winning the case.

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Can You Negotiate A Contingency Fee?

Yes, you can negotiate a contingency fee. You may have already investigated your accident, gathered all relevant documents, and convinced the insurance company to increase their first settlement offer when you first visit with a lawyer. If this is the case, you will have completed much of the job ordinarily performed by a lawyer. So, some attorneys agree to a lower percentage of contingency fees when you negotiate with them.

You must provide all the required details in the first meet with the lawyer. It will support you in the negotiation to reduce the contingency fee percentage. Keep in mind that you must negotiate with the attorney to reduce the contingency fee percentage in the first consult. After signing the informed consent form, you cannot deal with them. If you negotiate more effectively you can save hundreds of thousands, if not millions of dollars.

Contingency fees are not suitable for everyone. Because after paying contingency fees and other costs to the attorney, the plaintiff won’t get more in the end. If you don’t have money to pay attorneys in advance, a contingency fee basis would be a better choice. Documentation is required for claims, which can be tough to get without assistance. Getting help in filing a lawsuit can help you have the best chance of winning, whatever option you choose.

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